Gold diggers in Balochistan

Published Jan 23, 2013 01:22pm

A view of Reko Diq fields.
A view of Reko Diq fields.

The caretakers were expected to take care and the governors were supposed to govern. However, in Reko Diq’s case, governance failed and the care was never provided.

In a recent judgement, the Supreme Court of Pakistan has declared illegal the July 1993 agreement between the Balochistan Development Authority (BDA) and Australia’s BHP.  Since the original agreement stands null and void, all subsequent sales and transfers of the exploration rights by BHP to Tethyan Copper Co. (TCC), which is jointly owned by Canada’s Barrick Gold Corporation and Chile's Antofagasta, have been deemed illegal and void.

An interesting debate has ensued in Pakistan since the Supreme Court’s verdict was released earlier in January. Some commentators are critical of the court accusing it of killing another golden goose.  They have argued that foreign investors had sunk over $400 million into the project and thus, they were acting in good faith. Others have accused the Balochistan government of mishandling the project, which has further delayed the development of a goldmine in Pakistan.

I believe that the ongoing debate fails to acknowledge the role of key players who were instrumental in a series of dubious deals, which have finally been declared illegal and void by the Supreme Court. I am of the view that the foreign investors were fully aware of the risks when they signed agreements with government departments that were not authorised to bind the government, especially when caretaker governments were in place in Islamabad and Quetta.  Concomitantly, the caretaker government and the provincial governor should not have exceeded their authority to sign agreements that are the purview of the elected governments. I further contend that the claims of $400 million investment by TCC during 2006 and 2011 appear grossly exaggerated.

Let me take you back to 29 July 1993 when Reuters News reported the agreement between Balochistan Development Authority and Australia’s Broken Hill Holdings Ltd. to explore for gold and copper in Chagai District. According to Reuters, the “accord covers preliminary investigation and feasibility studies by BHP with support from the provincial government… Baluchistan will have a 25 per cent share in the project, expected to cost some $100 million.”

Here lies the problem. Pakistan in July 1993 was experiencing a political crisis. President Ghulam Ishaq Khan had sacked Mian Nawaz Sharif’s government and Moeen Qureshi was appointed the caretaker prime minister on July 19, 1993. The provincial government in Balochistan was also dissolved and in its place, retired Brig Raheem Durrani was appointed governor and Naseerullah Mengal the acting chief minister.

In the chaos that ensued in Pakistan in July 1993 where the critical institutions of the state, i.e., the army, the legislature, the civil establishment, and the superior courts were at loggerheads, the Australian Company willingly entered into an agreement with the agency of the provincial government, the Balochistan Development Authority, which probably had no authority to act on behalf of the people of Balochistan, especially when the provincial assembly had been dissolved. Such agreements are negotiated and ratified by the elected legislature and not by a minor authority (the BDA) whose credentials and expertise remained dubious at best.

The BDA has a sordid past and a deceitful present. It never had the expertise or the capacity to act as an interlocutor for the government of Balochistan in matters involving investments of millions of dollars. Perhaps it is the only public agency in the world whose chairman had the gall to extend his own tenure by three years in violation of all rules and regulations. In November 2011, Saddat Anwar Qumbrani, Chairman of BDA, extended his tenure by three years by issuing a notification to the effect.  What is even more bizarre is that Mr. Qumbarani continued in the Chairman’s role while the provincial authorities had been aware of the gross misconduct. In fact, he is still listed as the Chairman of BDA on the Balochistan government’s website.

The Supreme Court’s verdict exposes other missteps in Reko Diq’s case where foreign investors obtained concessions from the BDA in violation of the laws of the land. In particular, the verdict refers to an addendum to the 1993 joint venture agreement that was crucial in changing the very complexion of the original agreement. Again, a caretaker governor, Justice (retired) Amir-ul-Mulk Mengal, signed off on the addendum on December 24, 1999.  The Court noted that earlier Governor Syed Fazl Agha had refused to sign the same addendum because the Balochistan government had constituted a two member commission on October 12, 1999 to review the addendum.

October 12, 1999 is when General Musharraf staged a coup d’état and replaced all civilian governments with his appointees. Again, while the democratically elected governments in Pakistan were deposed by the military establishment, BHP willingly and knowingly made deals with authorities who drew legitimacy not by the rule of law but by ‘martial law’.  Now that the superior courts in Pakistan are free to render judgements, such deals, irrespective of their longevity, are coming up for scrutiny.

Some interesting arguments have been made in defence of foreign investors in Reko Diq. Writing in a national daily in Pakistan, a leading lawyer argued that the Supreme Court “should have applied the ‘bona fide purchaser’ rule in the Transfer of Property Act of 1882”, which implies that if “I buy property in good faith from someone who looks like they actually have the title to the land in question, then the law will deem me to be the proper owner even if it turns out that the seller was a complete fraud.”  Thus, even if BHP may not have “legally” secured exploration rights, the subsequent purchase of the same by Barrick Gold and Antofagasta should be deemed legal because the two acted in good faith.

First, what happened to caveat emptor (buyer beware). Second, if I were to fraudulently sell Barrick Gold’s head office, which is located a few blocks south of my office in downtown Toronto, to a naïve property investor in Karachi, would that give the Pakistani investor control over Toronto property, given that the Pakistani investor acted in good faith!

More than once, the foreign investors jumped hastily and willingly into the bed with caretaker governments and non-democratic governors. The deals they reached with ad hoc, and at times unconstitutional, regimes have tainted their legitimacy. If it were not for the Supreme Court, such dealings would have remained under the cloak of secrecy.

 


Murtaza_Haider-80-new
Murtaza Haider, Ph.D. is the Associate Dean of research and graduate programs at the Ted Rogers School of Management at Ryerson University in Toronto. He can be reached by email at murtaza.haider@ryerson.ca

 


The views expressed by this blogger and in the following reader comments do not necessarily reflect the views and policies of the Dawn Media Group.


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Murtaza Haider is a Toronto-based academic and the director of Regionomics.com.



He tweets @regionomics


The views expressed by this blogger and in the following reader comments do not necessarily reflect the views and policies of the Dawn Media Group.

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Comments (16) Closed




Sandip
Jan 23, 2013 01:36pm
The issue here is if investor signs deal today and if there is military coup tomorrow then they will have same argument that deals signed now are invalid. So well as a country you need to decide what is valid and what is not valid. Does this invalidation of deal also means those who signed the documents should be behind bars for agreeing to something they were not authorized to do?
SSS
Jan 23, 2013 02:00pm
If caretaker and military-backed governments have no right to sign contracts with foreign investors for any development project, then most mega projects initiated in Pakistan, including Tarbela, Mangla, Bhasha, Steel Mills were illegal. By the same logic, all appointments, including those of judges, in military/caretaker governments were illegal. We have a faulty history of non-elected governments, but there is no point in trying to re-write that history continuously. Judges and blog writers both need to be more pragmatic... of course if there is a proven malintention in the signing of this agreement then it was indeed right to declar it illegal.
Banjo
Jan 23, 2013 02:41pm
Mr. Haider, your views do not have much merit from a legal perspective. -- Otherwise a fan
BRR
Jan 23, 2013 02:45pm
The writer should know that the legitimacy of Pakistani governments, both local and Federal, have been in question quite often in the last 60 years. This being the case, there could / would have been no foreign investment at all, if the writers position is correct. Clearly, foreign businesses are not in the position to determine which local government is legitimate, or not. Business transactions with a local government, what ever its roots, should be honored as long as the local government has soverignity and jurisdiction. This SC decision does nothing to further the cause of foreign investments. Shame on everyone involved, where opportunities for development and progress by foreign investments are denied, denigrated and despised. People will suffer as a consequence.
MAB
Jan 23, 2013 02:47pm
Thank you for this very good assessment of the Reko Diq saga.
Syed
Jan 24, 2013 10:08am
I work in the mining sector and the companies who went into Pakistan were not happy at all, Berrick Gold is not just one, You expect the International firms to do business in Pakistan? where every 2nd official is corrupt and before they talk business, they talk comission. Pakistan is no Australia or Brazil. Sorry, you cannot expect any business unless you have transparent policies in place, don't go far, learn from the country you helped build, yes I am talking about UAE.
Sohail Saleem
Jan 23, 2013 03:39pm
Thank you for exposing the reality. You have done a good job in documenting these important facts Thank you for exposing the reality. You have done a good job in documenting these important facts and exposed how these foreign companies can take advantage of a corrupt or politically unstable government. I am not opposed to foreign investment in Pakistan; in fact it should be encouraged especially in mining, oil, and gas exploration, as long as the deal is beneficial to the mainland and its people. Unfortunately, historically, all our past contracts only benefit the investor and a few corrupt handlers. Pakistan is blessed with abundance of precious minerals, and energy resources and Pakistan can only explore them if they are willing to make adequate long term plans and smart short term agreements with companies that are global leaders with an emphasis of technology transfer. Please continue to document your thoughts and research about these important assets, which can turn around the future of Pakistan if handled by dedicated and qualified person and not by corrupt and greedy landlords and government officials.
Akram
Jan 23, 2013 04:01pm
some interesting points however the big picture should also be noted, did these companies really do these things in an underhanded manner knowing the asset they bought rights to, was worth something? If so why did BHP subsequently sell the rights to Reko Diq later. Mining companies only sell such assets either because they cost too much to develop, or they lost interest in the resource. Pakistani press seems to be full of conspiracy theories about reko diq much of which does not stack up. If BHP actually knew there was 6 billion tonnes of copper there (5th largest resource in the world), they would never have sold it for the measly price they did.
Saad F
Jan 23, 2013 05:28pm
Amazing article with an excellent objective analysis based on practicality and realism!
Ahmar Rashid
Jan 23, 2013 05:49pm
A very well written and thoroughly researched article, backed up with very sound arguments. May Allah give us resolve and power to protect our national assets. Ahmar Rashid, GIKI, Pakistan
Marina
Jan 23, 2013 06:23pm
One caretaker governor with military background Brig. Raheem, signed that illegal deal in 1993 and the other, a former chief justice of Balochistan High Court, Mr. Ameer-ul-Mulk Mengal in 2001. Still Tahir-ul-Qadri insists on taking military and judiciary in the loop while forming the caretaker government for upcoming elections. Hats off to you Mr. QADRI.
jee
Jan 23, 2013 09:15pm
interesting balouchistan filled with gold no wonders bomb blasts law and order failed why bkz everybody wants gold inner or out sider !!!!!!!!!!!!!!its a gold war b/w inside outside !!
Nasir Abbas
Jan 23, 2013 09:19pm
A very good analysis. Actions of Raisani government are dubious. If at all Pakistan needs expertise they may ask Iran who have knowledge of the field and can invest.
ali
Jan 23, 2013 09:22pm
Dear Mr Haider, Very good article and I fully understand from where you are coming and countries like ours are facing a lot of problems when it comes to contract awarding and contract signing with public sector; not to say we don
Waseem
Jan 24, 2013 02:53am
It makes sense
Mustafa
Jan 24, 2013 11:00pm
"...I don